Starbucks (SBUX) 8-K Starbucks Reports Second Quarter Fiscal 2003 Results

Exhibit 99.1

For Immediate Release
Contact: Mary Ellen Fukuhara
Starbucks Investor Relations
(206) 318-4025

Starbucks Reports Second Quarter Fiscal 2003 Results

SEATTLE; April 24, 2003 –Starbucks Corporation (Nasdaq: SBUX) today announced revenues and earnings for its fiscal second quarter ended March 30, 2003.

For the 13 weeks ended March 30, 2003, consolidated net revenues increased 22 percent to $954 million from $783 million for the same 13-week period of fiscal 2002. Retail revenues increased 22 percent to $809 million, and specialty revenues increased 22 percent to $145 million. Comparable Company-operated store sales increased 7 percent as compared with the same 13-week period of fiscal 2002.

Net earnings for the 13-week period ended March 30, 2003, increased to $52.1 million from $31.7 million for the same period in fiscal 2002. Diluted earnings per share were $0.13 for the 13-week period ended March 30, 2003, compared to $0.08 for the comparable period in fiscal 2002. Net earnings for the 13-week period ended March 31, 2002, included a one-time charge of $18.0 million for litigation settlement. Excluding the one-time charge, net earnings increased 21 percent from the comparable 13-week period ended March 31, 2002. There were no similar one-time charges in the second quarter of 2003.

For the 26 weeks ended March 30, 2003, consolidated net revenues increased 23 percent to $2.0 billion from $1.6 billion for the same period in fiscal 2002. Retail revenues increased 23 percent to $1.7 billion, and specialty revenues increased 24 percent to $299 million. Comparable Company-operated store sales for the 26-week period ended March 30, 2003, increased 8 percent as compared to the same 26-week period in fiscal 2002.

Net earnings for the 26-week period ended March 30, 2003, increased 31 percent to $130.5 million from $99.4 million for the same period in fiscal 2002. Diluted earnings per share were $0.33 for the 26-week period ended March 30, 2003, compared to $0.25 per share for the comparable period in fiscal 2002. Net earnings for the 26-week period ended March 31, 2002, included a one-time charge recorded during the second quarter and a capital gain recorded during the first quarter of fiscal 2002. Excluding both the one-time charge and the capital gain, net earnings increased 27 percent from the comparable 26-week period ended March 31, 2002.

- more -

- page 2 -

Today, Starbucks also discussed the following fiscal 2003 targets:

• Open approximately 1,200 new stores on a global basis, with refinements to the components of this target. In Continental North America the Company continues to expect to open 525 Company-operated locations and now plans to open approximately 275 licensed locations. Internationally, the Company continues to plan to open 75 locations in Company-operated markets and now plans to open approximately 325 locations in licensed markets.

• Achieve comparable store sales growth of 3 to 7 percent, with monthly anomalies, for the remainder of the year.

• Increase total revenues by approximately 20 percent for fiscal 2003.

• Achieve earnings per share of $0.66-$0.67 for fiscal 2003. This reflects a recent adjustment from the previously stated target of $0.67-$0.68, as a result of the agreement to acquire Seattle Coffee Company, announced on April 16, 2003. Accordingly, we are refining our quarterly targets to reflect this impact and now expect earnings per share of $0.16 for the third quarter and a range of $0.17 - $0.18 for the fourth quarter.

• Target an effective tax rate of 38.5 percent for the remainder of the fiscal year.

• Capital expenditures for fiscal 2003 in the range of $400-425 million.

The Company will be holding a conference call today at 1:30 p.m. Pacific time, which will be hosted by Howard Schultz, chairman and chief global strategist, Orin Smith, president and chief executive officer and Michael Casey, executive vice president and chief financial officer. The call will be broadcast live over the Internet and can be accessed at the Company’s web site address of http://www.starbucks.com/aboutus/investor.asp. A replay of the call will be available from approximately 4:00 p.m. Pacific time today through 4:00 p.m. Pacific time on May 1, 2003, by calling 1-800-642-1687, reservation number 9638096 or by accessing it via the Company’s web site at http://www.starbucks.com/aboutus/investor.asp.

The Company’s consolidated financial statements, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications, and should be reviewed in conjunction with this press release.

- more -

- page 3 -

STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

		13 Weeks Ended							13 Weeks Ended
		March 30,		March 31,		%			March 30,			March 31,
		2003		2002		Change			2003			2002
		(in thousands, except per share data)							As a % of total net revenues
									(unless otherwise indicated)
Net revenues:
	Retail	$	809,317	$	664,262		21.8	%		84.8	%		84.8	%
	Specialty		144,889		118,955		21.8	%		15.2	%		15.2	%
Total net revenues			954,206		783,217		21.8	%		100.0	%		100.0	%
Cost of sales and related occupancy costs			392,098		320,081					41.1	%		40.9	%
Store operating expenses			331,612		270,986					(a)41.0	%		(a)40.8	%
Other operating expenses			43,818		33,543					(b)30.2	%		(b)28.2	%
Depreciation and amortization expenses			57,961		49,972					6.1	%		6.4	%
General and administrative expenses			49,796		67,314					5.2	%		8.6	%
Income from equity investees			6,604		7,105					0.7	%		0.9	%
	Operating income		85,525		48,426		76.6	%		9.0	%		6.2	%
Interest and other income, net			1,239		2,135					0.1	%		0.3	%
	Earnings before income taxes		86,764		50,561					9.1	%		6.5	%
Income taxes			34,713		18,838					3.6	%		2.4	%
Net earnings		$	52,051	$	31,723		64.1	%		5.5	%		4.1	%
Net earnings per common share - diluted		$	0.13	$	0.08
Weighted average shares outstanding - diluted			399,622		397,861

(a)  Calculated as a percentage of retail revenues.

(b)  Calculated as a percentage of specialty revenues.

The following reconciliation of net earnings and earnings per share is provided to assist the reader with understanding the financial impact of a one-time item(unaudited and in thousands, except per share data):

	13 Weeks Ended							13 Weeks Ended
	March 30,		March 31,		%			March 30,		March 31,
	2003		2002		Change			2003		2002
Net earnings, as reported above	$	52,051	$	31,723		64.1	%	$	0.13	$	0.08
Settlement charge included in General and administrative expenses (net of tax)		—		11,340					—		0.03
Net earnings, excluding one-time item	$	52,051	$	43,063		20.9	%	$	0.13	$	0.11

- more -

- page 4 -

STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)

		26 Weeks Ended							26 Weeks Ended
		March 30,		March 31,		%			March 30,			March 31,
		2003		2002		Change			2003			2002
		(in thousands, except per share data)							As a % of total net revenues
									(unless otherwise indicated)
Net revenues:
	Retail	$	1,658,803	$	1,346,527		23.2	%		84.7	%		84.8	%
	Specialty		298,929		242,025		23.5	%		15.3	%		15.2	%
Total net revenues			1,957,732		1,588,552		23.2	%		100.0	%		100.0	%
Cost of sales and related occupancy costs			811,259		657,110					41.4	%		41.4	%
Store operating expenses			654,588		531,476					(a) 39.5	%		(a) 39.5	%
Other operating expenses			81,939		63,868					(b) 27.4	%		(b) 26.4	%
Depreciation and amortization expenses			115,346		100,273					5.9	%		6.3	%
General and administrative expenses			101,445		108,443					5.2	%		6.8	%
Income from equity investees			13,248		13,056					0.7	%		0.8	%
	Operating income		206,403		140,438		47.0	%		10.5	%		8.8	%
Interest and other income, net			5,735		4,628					0.3	%		0.3	%
Gain on sale of Starbucks Japan shares			—		13,361					0.0	%		0.8	%
	Earnings before income taxes		212,138		158,427					10.8	%		9.9	%
Income taxes			81,681		58,984					4.1	%		3.7	%
Net earnings		$	130,457	$	99,443		31.2	%		6.7	%		6.2	%
Net earnings per common share - diluted		$	0.33	$	0.25
Weighted average shares outstanding - diluted			399,427		394,917

(a)  Calculated as a percentage of retail revenues.

(b)  Calculated as a percentage of specialty revenues.

The following reconciliation of net earnings and earnings per share is provided to assist the reader with understanding the financial impact of one-time items(unaudited and in thousands, except per share data):

	26 Weeks Ended								26 Weeks Ended
	March 30,		March 31,			%			March 30,			March 31,
	2003		2002			Change			2003			2002
Net earnings, as reported above	$	130,457	$	99,443			31.2	%		$	0.33	$	0.25
Gain on sale of Starbucks Japan shares (net of tax)		—		(8,417	)						—		(0.02	)
Settlement charge included in General and administrative expenses (net of tax)		—		11,340							—		0.03
Net earnings, excluding one-time item	$	130,457	$	102,366			27.4	%		$	0.33	$	0.26

- more -

- page 5 -

STARBUCKS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)

				March 30,			September 29,
				2003			2002
				(unaudited)
ASSETS
	Current assets:
		Cash and cash equivalents		$	250,401		$	99,677
		Short-term investments – Available-for-sale securities			240,111			217,302
		Short-term investments – Trading securities			15,875			10,360
		Accounts receivable, net			103,142			97,573
		Inventories			203,212			263,174
		Prepaid expenses and other current assets			50,608			42,351
		Deferred income taxes, net			43,621			42,206
			Total current assets		906,970			772,643
	Equity and other investments				111,275			102,929
	Property, plant and equipment, net				1,329,905			1,265,756
	Other assets				42,071			43,691
	Goodwill and other intangible assets				30,706			29,764
	TOTAL ASSETS			$	2,420,927		$	2,214,783
LIABILITIES AND SHAREHOLDERS’ EQUITY
	Current liabilities:
		Accounts payable		$	144,831		$	135,994
		Accrued compensation and related costs			117,601			105,899
		Accrued occupancy costs			46,064			51,195
		Accrued taxes			29,195			54,244
		Other accrued expenses			87,585			72,289
		Deferred revenue			67,524			42,264
		Current portion of long-term debt			716			710
			Total current liabilities		493,516			462,595
	Deferred income taxes, net				27,421			22,496
	Long-term debt				4,719			5,076
	Other long-term liabilities				726			1,036
	Shareholders’ equity:
		Common stock and additional paid-in capital			931,054			891,040
		Other additional paid-in-capital			39,393			39,393
		Retained earnings			932,186			801,728
		Accumulated other comprehensive loss			(8,088	)		(8,581	)
			Total shareholders’ equity		1,894,545			1,723,580
	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY			$	2,420,927		$	2,214,783

- more -

- page 6 -

STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

			26 weeks ended
			March 30, 2003			March 31, 2002
			(unaudited)
OPERATING ACTIVITIES:
Net earnings			$	130,457			$	99,443
Adjustments to reconcile net earnings to net cash provided by operating activities:
	Depreciation and amortization expenses			124,761				107,866
	Gain on sale of investment			—				(13,361	)
	Provision for impairment and asset disposals			(925	)			6,971
	Deferred income taxes, net			4,199				(11,557	)
	Equity in income of investees			(4,930	)			(6,559	)
	Tax benefit from exercise of non-qualified stock options			18,020				24,976
	Net amortization of premium and accretion of discount on marketable securities			2,648				—
	Cash provided/(used) by changes in operating assets and liabilities:
		Net purchases of trading securities		(5,443	)			(3,577	)
		Inventories		60,655				48,672
		Accounts payable		6,997				(27,655	)
		Accrued taxes		(25,160	)			(39,617	)
		Deferred revenue		25,129				12,323
		Other operating assets and liabilities		2,139				34,131
Net cash provided by operating activities				338,547				232,056
INVESTING ACTIVITIES:
	Purchase of available-for-sale securities			(140,321	)			(159,894	)
	Maturity of available-for-sale securities			62,401				2,000
	Sale of available-for-sale securities			52,314				106,260
	Net additions to equity, other investments and other assets			(2,897	)			(7,744	)
	Proceeds from sale of equity investment			—				14,843
	Additions to property, plant and equipment			(182,011	)			(183,607	)
Net cash used by investing activities				(210,514	)			(228,142	)
FINANCING ACTIVITIES:
	Proceeds for the issuance of common stock			52,138				60,215
	Principal payments on long-term debt			(350	)			(347	)
	Repurchase of common stock			(30,144	)			(1,829	)
Net cash provided/(used) by financing activities				21,644				58,039
Effect of exchange rate changes on cash and cash equivalents				1,047				(179	)
Net increase in cash and cash equivalents				150,724				61,774
CASH AND CASH EQUIVALENTS:
Beginning of the period				99,677				51,250
End of the period			$	250,401			$	113,024

- more -

- page 7 -

Segment Reporting

Starbucks Corporation is organized into a number of business units that correspond to the Company’s operating segments: North American Retail, Business Alliances and All other business units, which includes International Retail, international store licensing, grocery channel licensing, warehouse club accounts, interactive operations, equity investees and other initiatives.

The table below reconciles revenues by operating segment to total net revenues on the Consolidated Statements of Earnings for the periods indicated(unaudited, in thousands):

		13 Weeks Ended						26 Weeks Ended
		March 30,			March 31,			March 30,			March 31,
		2003			2002			2003			2002
North American Retail		$	741,552		$	616,618		$	1,523,739		$	1,250,473
International Retail			67,765			47,644			135,064			96,054
	Subtotal Retail revenues		809,317			664,262			1,658,803			1,346,527
Business Alliances			71,295			53,374			142,921			107,349
All other business units (excluding International Retail)			110,333			79,170			225,647			163,959
Intersegment revenues			(36,739	)		(13,589	)		(69,639	)		(29,283	)
	Subtotal Specialty revenues		144,889			118,955			298,929			242,025
Total net revenues		$	954,206		$	783,217		$	1,957,732		$	1,588,552

The table below presents operating income by operating segment, net of intersegment eliminations for the periods indicated (unaudited, in thousands):

	13 Weeks Ended						13 Weeks Ended
	March 30,			March 31,			March 30,			March 31,
	2003			2002			2003			2002
							(as a percentage of related revenues)
North American Retail	$	115,897		$	99,812			15.6	%		16.2	%
Business Alliances		13,502			11,424			18.9	%		21.4	%
All other business units		12,679			12,989			9.0	%		11.5	%
Unallocated corporate expenses (a)		(56,553	)		(75,799	)		n/a			n/a
Operating income	$	85,525		$	48,426			9.0	%		6.2	%

(a) Includes general and administrative expenses and depreciation expenses of $6.8 million and $8.5 million on general and administrative related assets in 2003 and 2002, respectively. The fiscal 2002 expenses include the $18.0 million litigation settlement charge.

The table below presents operating income by operating segment, net of intersegment eliminations for the periods indicated (unaudited, in thousands):

	26 Weeks Ended						26 Weeks Ended
	March 30,			March 31,			March 30,			March 31,
	2003			2002			2003			2002
							(as a percentage of related revenues)
North American Retail	$	265,800		$	210,748			17.4	%		16.9	%
Business Alliances		29,201			26,095			20.4	%		24.3	%
All other business units		27,552			29,805			9.5	%		12.9	%
Unallocated corporate expenses (b)		(116,150	)		(126,210	)		n/a			n/a
Operating income	$	206,403		$	140,438			10.5	%		8.8	%

(b) Includes general and administrative expenses and depreciation expenses of $14.7 million and $17.8 million on general and administrative related assets in 2003 and 2002, respectively. The fiscal 2002 expenses include the $18.0 million litigation settlement charge.

- more -

- page 8 -

Austria and Switzerland

In March 2003, the Company announced plans to acquire its licensed operations in Austria and Switzerland from its partner, Bon appétit Group. Starbucks anticipates the acquisition will be completed in the Company’s third fiscal quarter and will not have a significant impact to its fiscal 2003 financial results.

The Company’s 19.5 percent equity ownership interests in both of these licensed operations had previously been accounted for under the cost method. As a result of the acquisition announcement and the Company’s ability to exert significant influence over operating and financial policies, Starbucks determined that the equity method of accounting should be applied for these investments. As required under generally accepted accounting principles, the prior periods have been adjusted as if these investments were always accounted for under the equity method. The following table summarizes the impacts, which resulted in a cumulative loss adjustment of $4.6 million:

	13 Weeks									26 Weeks			52 Weeks			52 Weeks
	Ended			13 Weeks Ended						Ended			Ended			Ended
	December 29,			December 30,			March 31,			March 31,			September 29,			September 30,
	2002			2001			2002			2002			2002			2001
Net earnings, before restatement	$	79,973		$	68,355		$	32,077		$	100,432		$	215,073		$	181,210
Restatement of income from equity investees		(1,567	)		(635	)		(354	)		(989	)		(2,274	)		(784	)
Net earnings, after restatement	$	78,406		$	67,720		$	31,723		$	99,443		$	212,799		$	180,426
Net earnings per common share – diluted:
Before restatement	$	0.20		$	0.17		$	0.08		$	0.25		$	0.54		$	0.46
After restatement	$	0.20		$	0.17		$	0.08		$	0.25		$	0.54		$	0.46

Consolidated Balance Sheets – Detail

Inventories consist of the following(in thousands):

		March 30,		September 29,
		2003		2002
		(unaudited)
Coffee:
	Unroasted	$	71,849	$	128,173
	Roasted		29,875		35,770
Other merchandise held for sale			61,630		65,403
Packaging and other supplies			39,858		33,828
Total		$	203,212	$	263,174

Property, plant and equipment are recorded at cost and consist of the following(in thousands):

	March 30,			September 29,
	2003			2002
	(unaudited)
Land	$	11,414		$	11,310
Buildings		54,465			30,961
Leasehold improvements		1,213,665			1,131,382
Roasting and store equipment		571,632			516,129
Furniture, fixtures and other		348,218			282,068
		2,199,394			1,971,850
Less accumulated depreciation and amortization		(928,382	)		(814,427	)
		1,271,012			1,157,423
Work in progress		58,893			108,333
Property, plant and equipment, net	$	1,329,905		$	1,265,756

- more -

- page 9 -

Systemwide Retail Store Sales

Systemwide retail store sales are used by industry analysts and by management to measure global penetration of Starbucks retail stores. However, this measure does not capture revenues generated in non-retail-store channels, such as foodservice accounts, warehouse club accounts, interactive operations, distribution through the Company’s grocery channel, or any of the external sales of bottled Frappuccino®, Starbucks DoubleShot™, or Tazo tea products.

Systemwide retail store sales, which include net sales for both Company-operated and licensed retail stores, were as follows (in millions):

	13 Weeks Ended				26 Weeks Ended
	March 30,		March 31,		March 30,		March 31,
	2003		2002		2003		2002
Company-operated retail stores sales(1)	$	809	$	664	$	1,659	$	1,347
Licensed retail stores sales(2)		306		231		600		458
Total	$	1,115	$	895	$	2,259	$	1,805

(1)	Company-operated retail store sales are reflected as “Retail” revenues on the accompanying consolidated statements of earnings.
(2)	Includes retail store sales as reported by domestic and international licensees. Portions of these sales may be estimated due to timing of periodic reporting by licensees.

The increases in systemwide retail store sales of 25 percent for both the 13-week and 26-week periods ended March 30, 2003, compared to the same periods in fiscal 2002 are primarily due to the opening of 1,090 stores in the last 12 months and strong comparable store sales growth in North America.

Store Counts

The Company’s store data for the periods presented are as follows:

		Net stores opened during the
		26-week period ended
						Stores open as of
		March 30, 2003		March 31, 2002		March 30, 2003
Continental North America:
	Company-Operated Stores		227		307		3,723
	Licensed Stores		151		153		1,229
			378		460		4,952
International:
	Company-Operated Stores		33		55		417
	Licensed Stores		161		144		1,089
			194		199		1,506
Total Stores			572		659		6,458

- more -

- page 10 -

Additional Information

The following reconciliation of earnings before income taxes and earnings before income taxes as a percentage of total net revenues is provided to assist the reader with understanding the financial impact of one-time items(unaudited and in thousands, except per share data):

	26 Weeks Ended								26 Weeks Ended
	March 30,		March 31,			%			March 30,			March 31,
	2003		2002			Change			2003			2002
Earnings before income taxes, as reported	$	212,138	$	158,427			33.9	%		10.8	%		9.9	%
Gain on sale of Starbucks Japan shares		—		(13,361	)					—			(0.8	%)
Settlement charge included in General and administrative expenses		—		18,000						—			1.2	%
Earnings before income taxes, excluding one-time items	$	212,138	$	163,066			30.1	%		10.8	%		10.3	%

Starbucks Coffee Company is the leading retailer, roaster and brand of specialty coffee in the world, with more than 6,000 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The Company is committed to offering the highest quality coffee and the Starbucks Experience while conducting its business in ways that produce social, environmental and economic benefits for communities in which it does business. In addition to its retail operations, the Company produces and sells bottled Frappuccino® coffee drinks, Starbucks DoubleShot™ coffee drink, and a line of superpremium ice creams through its joint venture partnerships. The Company’s other brands enhance theStarbucks Experience through best-of-class products: Tazo Tea Company offers a line of innovative premium teas, and Hear Music produces and distributes a line of exceptional compact discs.

This release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, including anticipated store openings, comparable store sales expectations, trends in or expectations regarding the Company’s revenue growth, capital expenditures, effective tax rate, net earnings and earnings per share results, are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors including but not limited to, coffee and other raw material prices and availability, successful execution of internal performance and expansion plans, fluctuations in U.S. and international economies, any economic ramifications from the war in the Middle East, any incidents of terrorism, or other international events or developments, the impact of competition, the effect of legal proceedings, and other risks detailed in the Company’s filings with the Securities and Exchange Commission.

###